Justice Denied? the Government's Response to the Ombudsman's
Total Page:16
File Type:pdf, Size:1020Kb
House of Commons Public Administration Select Committee Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life Sixth Report of Session 2008–09 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed 12 March 2009 HC 219 Published on 19 March 2009 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Public Administration Select Committee The Public Administration Select Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration and the Health Service Commissioner for England, which are laid before this House, and matters in connection therewith, and to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service. Current membership Dr Tony Wright MP (Labour, Cannock Chase) (Chairman) Mr David Burrowes MP (Conservative, Enfield Southgate) Paul Flynn MP (Labour, Newport West) David Heyes MP (Labour, Ashton under Lyne) Kelvin Hopkins MP (Labour, Luton North) Mr Ian Liddell-Grainger MP (Conservative, Bridgewater) Julie Morgan MP (Labour, Cardiff North) Mr Gordon Prentice MP (Labour, Pendle) Paul Rowen MP (Liberal Democrats, Rochdale) Mr Charles Walker MP (Conservative, Broxbourne) Jenny Willott MP (Liberal Democrats, Cardiff Central) Powers The powers of the Committee are set out in House of Commons Standing Orders, principally in SO No 146. These are available on the Internet via www.parliament.uk Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/pasc Committee staff The current staff of the Committee are Steven Mark (Clerk), Laura Dance (Second Clerk), Pauline Ngan (Committee Specialist), Louise Glen (Senior Committee Assistant), Lori Verwaerde (Committee Assistant) and Shane Pathmanathan (Committee Support Assistant). Simon Fuller (Legal Specialist) also assisted the Committee in this inquiry. Contacts All correspondence should be addressed to the Clerk of the Public Administration Select Committee, Committee Office, First Floor, 7 Millbank, House of Commons, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5730; the Committee’s email address is [email protected] Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life 1 Contents Report Page Summary 3 1 Introduction 5 2 Implementation of the Government’s decision 7 “Disproportionate impact” test 8 Widows and widowers 10 Judicial review 10 3 The Government’s approach to this case 11 Findings of maladministration: “judge on its own behalf” 12 Justice or charity? 15 Primary responsibility of Equitable Life 15 Responsibility to taxpayers generally 16 Regulatory failure and compensation 16 Process for establishing the scheme 18 Sir John Chadwick’s role 20 Speed 21 Transparency 22 Conclusion 23 4 Wider issues 24 Ombudsman’s role 24 Accountability 25 Conclusions and recommendations 27 Formal Minutes 32 Witnesses 33 List of written evidence 33 List of unprinted evidence 33 List of Reports from the Committee during the current Parliament 34 Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life 3 Summary This Report contains our views on the Government’s response to the Parliamentary Ombudsman’s report on Equitable Life. It follows an earlier Report which we published in December 2008, before the Government’s response was available. In essence, we are deeply disappointed with the response. We are disappointed that the Government has chosen to act as judge on its own behalf by rejecting and qualifying a number of the Ombudsman’s findings. It has done so for reasons which are not well explained in its published response, and which have therefore been difficult to assess. We are disappointed that the Government has decided that compensation is not warranted, arguing that it is under no duty to put right, even in part, wrongs that it admits the State has caused. This may be a legally valid position, but we think that most people would consider it to be a morally unacceptable one. We also struggle to understand the logic behind this decision. The only potentially valid reason that the Government provides, namely that Parliament has considered that financial regulators should not normally be held liable in the courts for financial loss, was introduced late in the day in a way that we find to be shabby, constitutionally dubious and procedurally improper. We are disappointed with the process that the Government has decided to follow for making ex gratia payments to policyholders. This process looks set to be complex, and therefore likely to be slow and onerous for all those involved. It does not take into account the difficult personal circumstances of many policyholders, for example, their age, their health, or the number of years that have passed since the relevant events. This represents a basic failure on the part of the Government to understand the problem which its scheme is supposed to address. The Government’s response has produced a strongly negative response not only from us, but also from the Ombudsman, from Equitable Life and from policyholder representatives. This should give the Government pause for thought. Nonetheless, we accept that the scheme proposed by the Government could help to improve the lot of some policyholders. If this is the best scheme available, we want it to work as well as possible. This requires the Government to ensure that its scheme makes a tangible difference to policyholders as soon as possible. This is much more likely to be achieved through a scheme which is simple and clear. The Government has proposed a “disproportionate impact” test. This test is an unnecessary complication, but if it must remain, it needs to be workable and simple to implement, and should not rely on information which will be hard to access. Individual policyholders have not been told when they can expect to find out if they qualify for a payment, or when they might receive it. This uncertainty is unsettling. An indicative timetable for the scheme needs to be made available as soon as possible. Many policyholders have already died; more will have died by the time a scheme is implemented. It would be deeply unfair if their surviving partners were denied the opportunity to benefit. 4 Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life The Government has appointed Sir John Chadwick, a retired judge, to give it advice on the design of a scheme. His role is another potential factor for delay. There seems to be nothing improper about Sir John’s appointment, despite claims to the contrary by policyholder representatives. It is, however, important for the Government to be clear and honest about which parts of the scheme’s design are independent and which are not. It is important that Sir John’s advice and the representations he receives should be published to show the extent to which the Government has followed his advice as well as how this advice may have been influenced. We also give further thought to two wider issues on which we have previously reported. It is to the Parliamentary Ombudsman’s credit and to the credit of the Government that she achieves a satisfactory remedy in the vast majority of cases she investigates. However, she faces greater obstacles where her investigations find injustice which is likely to be very expensive to put right. We have previously called for comprehensive and fit for purpose investigations in such cases that stretch beyond the Ombudsman’s remit, investigations that would be able both to look at the picture in the round and apportion responsibility. Until the Government embraces this kind of broader investigation, the Ombudsman system will remain the best option for holding public bodies to account for costly administrative failings. Despite the numerous opportunities for the prudential regulators to learn lessons, the system of regulation has once again failed the taxpayer and the customers of financial institutions. Effective regulation requires honest and full learning from past mistakes, and this in turn requires regulators to be consistently and effectively accountable. A debate is now needed on how to achieve that kind of accountability. Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life 5 1 Introduction 1. On 15 January 2009, the Chief Secretary to HM Treasury made a statement to the House1 in response to the Parliamentary Ombudsman’s report,2 published in July 2008, into the prudential regulation of the Equitable Life Assurance Society (ELAS). Later that same day, the Government published its written response to the Ombudsman’s report.3 2. In summary, the Government’s response: a) accepts some of the Ombudsman’s findings of maladministration and injustice, although frequently with qualifications of the basis on which the Government is doing so; b) rejects other findings of maladministration and injustice; c) apologises for the findings the Government accepts; and d) rejects the Ombudsman’s recommendation for compensation as a remedy; but e) proposes to establish an ex gratia scheme, after it has received advice from a former judge on certain issues. 3. This Report contains our considered reaction to the Government’s response. It needs to be read in the context of our earlier Report, Justice Delayed, which we published on 15 December 2008.4 We stand by the views we expressed in that Report. We repeat them here only as epigraphs to parts of this Report, and where sense demands it. 4. When we published our views in December, we stated: Whether we need to return to these issues in the New Year will depend on what the Government has to say—but if it gives us any cause for concern, we will not hesitate to do so.5 5.